CHAPTER ONE: OVERVIEW OF NUMBERING

A. Inefficient Use and Increasing Demand for New Numbers in California Is Causing Area Code Proliferation

California is currently experiencing an explosive demand for telephone numbers and area codes. The increased demand for numbers is due to competition for local phone service, the popularity of faxes, pagers, cell phones, internet services, etc., California's rapid business expansion in the 1990's, and the state's population growth. This increase in demand is complicated by a number allocation system dating from the 1940s that is inefficient in today's competitive market because it was not designed to provide telephone numbers to more than one company. Prior to 1997, one phone company⁵ provided local telephone service to all customers in a particular area, and new area codes were opened as the population grew. The number of California area codes rose steadily from 3 in 1947 to 13 in 1992, and stayed at that level until January 1997. However, during the next three years, the number of area codes in California nearly doubled whereby California had 25 area codes the end of 1999. The Telecommunications Act of 1996 partly contributed to this proliferation of area code growth because it sought to open competition for the local telephone service market so competitive local phone companies⁶ began to enter the marketplace each requiring its own blocks of numbers.

In the past, when telecommunication companies needed telephone numbers to serve their customers, they received blocks of 10,000 numbers, i.e. prefixes. Since companies were assigned blocks of 10,000 numbers, they may have been assigned more numbers than they needed. For example, under this system, a company with only 500 customers would have received a 10,000 number block, the same quantity of numbers a company with 9,500 customers would receive. Therefore, numbers are taken in these large blocks which creates an artificial demand for more numbers and fuels the need to open more area codes. The need to assign 10,000 numbers is a practice from the past when one telephone company provided service to all customers in its territory. Today, with over 200 telecommunications companies in the state needing numbers to serve customers and with the limited quantity of numbers available in each area code, this process is no longer an efficient way to allocate numbers.

In conclusion, the rise in demand for numbers, the changes in the law, and the inefficient allocation system for numbers have forced the rapid opening of new area codes throughout the state. The number of area codes in California has nearly doubled since 1997. Without the implementation of several number conservation measures, the telecommunications industry had plans to add 22 more area codes in California by 2003. However, with more and more companies needing numbers of their own, creating new area codes is not necessarily the best solution.

B. 831 HISTORY AND CPUC DECISIONS

The 831 area code is a classic example of area code proliferation in California. The 831 area code was created in July 1998 when it was split from the 408 area code. However, the 408 area code was originally part of the 415 area code, one of the first three area codes created in California in 1947, until it was split from the 415 area code in June 1959. The 415 area code originally covered all of central California. The geographic area comprising of the original 415 area code is now divided into five additional area codes, which are 209, 408, 510, 650, and 707.

The North American Numbering Plan Administrator (NANPA) has not determined that the 831 area code is running short of numbers. If more area codes need to be created then the available methods of doing so are geographic splits and overlays. In an overlay, a new area code is created covering the same geographical area as the existing area code. Under CPUC and Federal Communications Commission (FCC) rules, all customers with numbers in either the new or the old area code are required to dial 1 plus the area code plus the seven digit number (known as 1 + 10 digit dialing) to reach any other number in either of the two area codes. The CPUC has not yet reached a decision on the exhaust relief plan for the 831area code.

When the first overlay and 1 + 10 digit dialing were implemented in the 310 area code (located in the Los Angeles area) in April of 1999, customers expressed strong objections to the overlay and to the requisite 1 + 10 digit dialing. The CPUC halted the 310 overlay and ten-digit dialing in September. In December of 1999, the CPUC's Decision 99-12-051 suspended all overlays previously approved. In that same decision, the CPUC required its Telecommunications Division (TD) staff to conduct a utilization study in order to quantify the availability of unused numbers in the 831 area code. This report fulfills that requirement.⁷

1. Code Administration Allocates Prefixes

For those area codes nearing number exhaust, the CPUC has instituted a lottery process to fairly allocate the remaining prefixes among phone companies when demand exceeds supply. There is no 831 area code lottery. Therefore, companies receive numbers from the Code Administrator.⁸ For initial prefixes, there are no restrictions as long as the company is authorized to provide telecommunications services in California.⁹ For growth prefixes, companies must meet a 75% fill rate, six-months to exhaust, and make regular reporting to the FCC.¹⁰ Companies requested and received 56 prefixes in the 831 area code between January 1, 2000 and December 31, 2000. With the CPUC working with companies to reclaim their excess prefixes, they returned 12 prefixes to the NANPA during the same period for a net distribution of 44 prefixes. During the first eleven months of 2001, 27 prefixes have been requested and granted and 17 prefixes have been returned to the NANPA, for a net distribution of 10 prefixes. As of November 30, 2001, there were 458 prefixes available for assignment in the 831 area code.¹¹

C. CPUC Efforts to Resolve Area Code Proliferation

Recognizing the substantial social and economic burdens associated with constant area code changes, the CPUC has taken steps to resolve the numbering crisis. Responding to the widespread public outcry over the proliferation of new area codes, the CPUC suspended, beginning in December 1999, all plans for new area codes that were previously approved. Also, in July 2000, the CPUC adopted number conservation measures, including establishing number pooling trials, fill rates, and sequential numbering

2. Number Pooling

The CPUC, with FCC approval, has begun number pools in fourteen area codes, in order to boost the efficiency of phone number allocation. In addition, the CPUC has ordered number pooling for an additional two area codes in early 2002. In March 2002, national number pooling begins. Three or four additional number pools will be implemented in California per quarter. Number pooling is tentatively scheduled to begin in 831 in fall 2002. By spring 2003, number pooling will be implemented in all of California. Number pooling allows telephone companies to receive numbers in smaller blocks than the traditional 10,000 numbers which enables multiple providers to share one prefix thereby utilizing this limited resource more efficiently. The technology that enables the network to support the assignment of smaller blocks is referred to as Local Number Portability (LNP).¹² The FCC mandated LNP as a way to enable customers to retain their telephone numbers when they switch their telephone service to another local provider. This same platform is utilized for number pooling. The FCC required all wireline carriers to become LNP-capable by the end of 1998 in the most populous 100 Metropolitan Statistical Areas (MSAs) in the country. Thirteen of the top 100 MSAs are located in California.¹³

Though LNP technology has existed for several years, the FCC later granted cellular and PCS companies a time extension, until November 2002, to become LNP-capable. The FCC gave paging companies a permanent exemption from the LNP requirement.¹⁴ Therefore, at this time only wireline carriers can participate in number pooling. ¹⁵ In the area codes with number pooling, wireline carriers participate in pooling while wireless carriers participate in the lottery. If there is no lottery then wireless carriers receive prefixes from the Code Administration. In the remaining area codes with rationing in effect, all phone companies participate in the lottery.¹⁶

The CPUC has been aggressively setting up number pools. A pooling schedule is tentatively set for fall 2002 for the 831 area code. Once pooling is implemented in the 831 area code, all wireline companies with numbers in 831 will be required to donate 1,000-number blocks to the pooling administrator. While FCC rules only require companies to donate numbers to a number pool in rate centers located in top 100 MSAs, many companies have implemented LNP capability throughout their service territories. These companies could also donate or receive thousand-blocks in all rate centers in an area code's number pool, rather than just in the rate centers located within the top 100 MSAs. Under the number pooling program, all LNP-capable carriers will receive numbers in blocks of 1,000 on an as-needed basis. There is no rationing process in the pool, and the blocks received can be put into service almost immediately upon receipt. All wireless carriers will continue to receive numbers in blocks of 10,000 through the monthly lottery allocation process or from the Code Administration in area codes without a lottery process.

3. Improved Number Inventory Management

While the pooling trials have improved the efficiency of the distribution of numbers to companies, they do not have strong incentives to efficiently manage the numbers already allocated to them. Accordingly, the CPUC ordered companies to improve number inventory management with measures including rules on fill rates and sequential numbering. In July 2000, the CPUC issued Decision 00-07-052 that extended number conservation measures adopted in the 310 area code to other area codes within California. These number conservation measures include the following:

· Companies are required to return to NANPA any unused prefix held for more than six months.

· An "imminent exhaust criterion" is established in all area codes with lotteries or pooling trials. In each rate center in which companies request additional numbers, they must provide to NANPA a form demonstrating they will be out of numbers within six months.¹⁷

· Companies must satisfy a minimum 75% fill rate requirement before being eligible to request a growth prefix in any area code in rationing and to receive a thousand-block through number pooling. Companies must assign numbers in a thousand-block sequence where numbers are assigned in the next block only if a 75% fill rate has been attained in the prior block.

TD anticipates these policies will potentially free more numbers for use in number pooling to be allocated through the lottery or from Code Administration ,or use by companies. Indeed, these measures together with the effects of number pooling have already achieved some positive effects. For example, since the CPUC extended the 75% fill rate and imminent exhaust rules to all area codes, CPUC staff has observed that the demand for growth prefixes in each month's lottery has declined dramatically. Further evidence of the effectiveness of the CPUC's number conservation policies is the recent increase in the number of excess prefixes in the 831 area code being returned to the NANPA by companies, as mentioned in Section B.1 above

4. CPUC Efforts at Federal Level

The FCC has exclusive jurisdiction over numbering in the United States. Therefore, the CPUC's number conservation policies (pooling, fill rates, and sequential numbering) are governed by the FCC's delegation of authority to the states. In recognition of the severity of the numbering crisis in California, the CPUC has aggressively petitioned the FCC for additional authority. As a result, the FCC has delegated authority to plan and implement area code changes, as well as authority to implement number conservation measures.

a. Authority Regarding Pooling

On April 26, 1999, the CPUC filed a petition with the FCC requesting authority to institute number pooling trials and other number conservation measures within the state to improve the management of this public resource. On September 15, 1999, the FCC granted that petition to institute mandatory number pooling on a trial basis, deploying it sequentially in one MSA at a time. When the FCC granted the CPUC the authority to deploy various numbering resource optimization strategies, including the authority to institute thousand-block number pooling trials, it also clarified that California's authority will be superseded by future national measures adopted by the FCC.

On March 31, 2000, the FCC released the Numbering Resource Optimization Report and Order and Further Notice of Proposed Rulemaking (first NRO Order).¹⁸ The first NRO Order sets forth rules for defining numbers, forecasting, tracking and auditing companies' use of numbers, and for conservation measures associated with number usage, including but not limited to number pooling. The definitions of numbers and timelines for aging and reserved numbers that were adopted in that order have been incorporated into the utilization data cited herein. With the release of the first NRO Order, the FCC adopted a number of administrative and technical measures that will allow it to closely monitor the way numbering resources are used and to promote the efficient usage of numbering resources. In particular, the FCC adopted a nationwide system for allocating numbers in blocks of one thousand rather than ten thousand wherever possible, and announced its intention to establish a plan for a national rollout of thousand-block number pooling.

Since the FCC recognized that the states' thousand-block number pooling trials underway might not conform to the national standards set forth in the first NRO Order, the FCC gave state commissions until September 1, 2000 to conform their thousand-block number pooling trials to the national framework. One requirement imposed in California which differs from the national standards is the requirement that companies meet a 75% fill rate in each block before they may receive an additional block from the pooling administrator. The CPUC recognized the 75% fill rate as a critical factor in the success of the 310 pooling trial and petitioned for a waiver of compliance with the national rules. On August 31, 2000, the FCC issued an order granting the CPUC authority to continue to use its pooling rules until the FCC decides on the merits of the petition, or until December 31, 2000, whichever occurs sooner. This allowed California to continue applying the 75% utilization rate in its number pooling efforts.

On December 29, 2000, the FCC issued its Second Report and Order on Number Resource Optimization (second NRO Order). In the second NRO Order, the FCC ruled on California's Petition for Waiver, concluding that the CPUC may continue to use its utilization thresholds subject to parameters set in this order (when FCC thresholds exceed California's, California must migrate to the more stringent utilization thresholds). The FCC also declined to adopt a transition period between the time that cellular carriers must implement LNP and the time they must participate in any mandatory number pooling.

The first NRO Order further constrains the CPUC by concluding that the rollout of thousand-block number pooling should first occur in area codes that are located in the largest 100 MSAs. In its comments prior to the release of the first NRO Order, the CPUC argued that California would be precluded from exploring whether number pooling could alleviate the crises for number resources in many parts of the state that are located outside the top 100 MSAs. The CPUC believes the FCC should delegate authority to the states to order deployment of LNP. This grant of authority to California would make pooling possible throughout the state.

b. Authority Regarding Technology-Specific Area Codes

Currently, state commissions are constrained by the FCC from establishing an area code specifically for wireless telecommunications services. On April 26, 1999, the CPUC filed another petition with the FCC requesting authority to create service-specific or technology-specific area codes. In the 831 area code, there are 17 wireless carriers holding 83 prefixes. If the CPUC were allowed to create a separate area code for those companies, the 83 prefixes in the 831 area code could be reassigned to other phone uses thus, prolonging the life of the existing area code. To date, the FCC has not acted on the CPUC's petition. In the second NRO Order, the FCC asks for further comments on technology-specific or non-geographic area codes.

On September 28, 2000, Governor Davis signed into law Senate Bill (SB) 1741, authored by Senator Bowen. SB 1741 requires the CPUC to request authority from the FCC to require telephone corporations to establish technology-specific area codes based on wireless and data communications, and to permit 7-digit dialing within both that technology-specific area code and the underlying pre-existing area code(s). The bill requires the CPUC to use any authority so granted unless it makes a specified finding that there is no reason to do so. The legislation also prohibits the CPUC from implementing any authority granted by the FCC in a manner that impairs number portability. The petition that the CPUC filed with the FCC in April 1999 fulfills the technology-specific area code requirement set forth in the bill. The bill also prohibits the CPUC from approving new area codes unless a telephone utilization study has been performed and all reasonable telephone number conservation measures have been implemented. This utilization study fulfills the telephone utilization study portion of SB 1741.

5. Utilization Studies

Before requiring the residents and businesses of the 831 area code to undergo another area code change, the CPUC recognized the necessity of determining the amount of telephone numbers that are in use and yet to be used. To that end, the CPUC required companies to provide usage data to the CPUC as of December 31, 2000. The TD contracted with NeuStar to collect the data; NeuStar submitted the aggregated data in its entirety to TD in April 2001. The definitions used in the utilization study are in Appendix A-1.